Thursday, October 18, 2018 7:10:57 PM
The winners and losers in the new NAFTA
"Trump’s NAFTA Strategy: Bluff, Rebrand, Declare Victory"
October 2, 2018 8.51am AEST
IMAGE - Prime Minister Justin Trudeau and Minister of Foreign Affairs Chrystia Freeland arrive
to hold a news conference on the United States Mexico Canada Agreement (USMCA) in
Ottawa on Oct. 1, 2018. THE CANADIAN PRESS/Sean Kilpatrick
Author Atif Kubursi
Professor Emeritus of Economics, McMaster University
NAFTA is out but the United States-Mexico-Canada-Agreement (USMCA) is in .. https://www.cbc.ca/news/politics/usmca-nafta-trade-deal-1.4845219 .
But how different is USMCA from NAFTA? Who loses and who wins?
Canadian negotiators and government officials are singing the praises of the new deal, still subject to approval by U.S. Congress. U.S. Trade Representative Robert Lighthizer and Foreign Affairs Minister Chrystia Freeland said the agreement “will result in freer markets, fairer trade and robust economic growth in our region .. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/september/joint-statement-united-states .”
They added: “It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home.”
In this January 2018 photo, Foreign Affairs Minister Chrystia Freeland, centre, talks with United States
Trade Representative Robert Lighthizer, right, and Mexico’s Secretary of Economy Ildefonso Guajardo
Villarreal during NAFTA renegotiations. (Graham Hughes/The Canadian Press)
It’s understandable that the chief negotiators would try to sell the deal as a win-win-win agreement, but, like any deal resulting from long and at times acrimonious negotiations, it’s not quite that simple.
Challenging trade practices
The most significant achievement by Canadian negotiators is their success in preserving Chapter 19 .. https://globalnews.ca/news/4422423/nafta-chapter-19-explainer/ .. from the original NAFTA. These provisions allow Canada, Mexico and the United States to challenge one another’s anti-dumping and countervailing duties in front of a panel of representatives from each country.
This is generally a much easier, less costly and more predictable process than trying to challenge a trade practice in a U.S. court. Canada has successfully used Chapter 19 to challenge the United States on its softwood lumber restrictions .. https://www.theglobeandmail.com/report-on-business/canada-calls-for-stop-to-us-softwood-lumber-duties/article37516085/ .
[Insert: The truth behind Trump’s “trade war” with Canada
"For Americans, Trump’s tariffs on imports could be costly"
Trump didn't start the fight over Canadian softwood lumber
[...]
“It never ends; it’s like Groundhog Day,” says Ben Cashore, director of the Program on Forest Policy and Governance at Yale University. Cashore had been researching this dispute for years, he says, until he realized that it would go on forever. “I thought there had to be a better use of my time.”
p-The big difference this time around is the politicization of the spat. Presidents and Cabinet members don’t normally publicize their response to such a mundane trade dispute.
p-But Trump’s campaign was defined by blaming free trade for American job losses and economic woes, so his administration’s decision to publicize the move is a political calculation: It makes his team appear to crack down on trade abuses, even though it’s just more of the same.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=130839346 ]
Auto sector
Canada has also staved off the tariffs Trump threatened to impose on autos and auto parts .. http://news.morningstar.com/all/canada-news-wire/20181001C6515/usmca-framework-achieves-auto-gains-unifor.aspx .. that could have devastated the Canadian auto industry, which contributes over $50 billion in income and sustains more than 500,000 direct and indirect well-paying jobs in Canada.
The agreement would shield the first 2.6 million Canadian car exports to the U.S. from any tariffs. This is significantly higher than the current 1.8 million cars that Canada on average exports to the U.S. annually.
Under the terms of the agreement starting in 2020, a car will qualify for tariff-free treatment only if 75 per cent of its contents are made in North America, up from 62.5 per cent in the current NAFTA.
In addition, at least initially, 30 per cent of the content must be produced by workers earning at least US$16 an hour. This will ramp up to 40 per cent in 2023. The wage is more than three times what the average Mexican autoworker earns now.
A worker on the production line at Chrysler’s assembly plant in Windsor, Ont., works on a minivan in
January 2011. THE CANADIAN PRESS/Geoff Robins
Despite these successes, there are a few negatives to contend with that would affect this key industry. The wage hikes required in Mexico will undoubtedly raise the cost of production of North American cars and render a good part of them non-competitive on world markets, particularly in Asia.
While higher Mexican wages may discourage auto makers in Canada and the U.S. to relocate to Mexico, the new rules could create strong incentives for American and Canadian auto makers to move to Asia.
The dairy industry
The U.S. has repeatedly complained about the unfairness of Canada’s protection of its dairy industry as if the Americans don’t protect their own farmers. The Canadian supply management system is a far more efficient way to protect farmers’ incomes than the farm price support system in place in the United States.
Nonetheless, the U.S. got its way, forcing Canada to yield a larger market share for American dairy farmers. While Canada, under the new terms of the Trans-Pacific Trade Agreement, was willing to grant a 3.2 per cent market share to trade partners, under the USMCA, it yields 3.6 per cent.
[Why Canadian milk infuriates Donald Trump
[...]
Would controlled milk production work in the U.S.?
[...]
Exports
A concern expressed by representatives of the Dairy Business Association was whether the Canadian system would limit the ability to export milk to other countries.
p-Sherk said Canadian farmers are not interested in the export market but rather are working to increase milk and dairy sales within their own country.
p-“Exports provide the lowest return so we’re not interested in that,” he said. “Yes, demand will grow as the world population grows but it will be in places like Africa and Asia and what will they be able to afford to pay?”
p-Deitrich adds, “If we are going to be a wildly exporting country we would be shooting ourselves in the foot. We believe it is better to develop more dairy products and create more markets for our milk.”
Financing
The two Canadian speakers also advised, “Whatever route you take be sure you get the bankers involved. In Canada, bankers are more willing to loan money for modernization because of the stable prices.”
p-Don Hamm, president of the Wisconsin National Farmers Organization, points out that some of the problems with over-production in this country have been the result of the guaranteed loan programs. He notes that while the programs were intended to help farmers get affordable loans, all they have done is encourage bankers to loan more money for dairy expansions.
p-Both the NFO and Farmers Union have been concerned over expanded production that results in the inability of farmers to negotiate a fair price for their milk.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=141429839]
Perhaps more significant is Canada’s willingness to eliminate the pricing scheme for what is known as Class 7 dairy products allowing U.S. producers to out-compete Canadian farmers.
-
Read more: How the dairy lobby's cash grab put Canada in Trump’s crosshairs
http://theconversation.com/how-the-dairy-lobbys-cash-grab-put-canada-in-trumps-crosshairs-102974
-
The government has already suggested .. https://ipolitics.ca/2018/10/01/supply-management-saved-say-trudeau-and-freeland/ .. it will introduce subsidies and farm income protection schemes that Canadian taxpayers will have to pay for.
Drug patents
A serious change is Canada’s acceptance of lengthening the patents of pharmaceutical companies to 10 years. This pretty much means that U.S. drug companies will now be able to sell pharmaceuticals in Canada for 10 years before facing generic competition. That’s up from the eight years of “market protection” that’s currently in place.
-
Read more: NAFTA negotiations may threaten pharmacare
http://theconversation.com/nafta-negotiations-may-threaten-pharmacare-102851
-
This means individuals, insurance companies and governments will pay more for pharmaceuticals.
Intellectual property rights
New and more stringent intellectual property rights rules and time limitations for the protection of patents and trademarks, including those for biotech, financial services and even domain names, are included in USMCA.
While many believed that these updates were necessary given that the original agreement was negotiated 25 years ago, Canada will benefit less from these protections than the U.S. given the differences in size of these sectors in both countries.
Labour, environment
The USMCA makes a number of significant upgrades to environmental and labour regulations, especially those in force in Mexico. The agreement stipulates that Mexican trucks that cross the border into the United States must meet higher safety regulations, and that Mexican workers must have more ability to organize and form unions.
[That in itself is good news, but...]
The real issue with these provisions, now as before, is this: Will these new standards be implemented in Mexico? U.S. negotiators tried hard to introduce an automatic sunset clause on the deal but
failed to get their way .. https://www.theguardian.com/us-news/2018/aug/25/nafta-trump-drops-sunset-clause-demand-mexico .
As things stand now, the USMCA stipulates that the three nations will automatically review the agreement after six years. If all parties agree it’s still working, then the deal will continue for the full 16-year period, with the ability to renew after that for another 16 years.
Trump did not get his wish for the sunset clause, but there will be an automatic review, although it won’t happen until long after Trump has vacated the Oval Office.
Better than chaos
So it’s incorrect to claim that all North Americans will be better off under the new deal. There will be losers, and there will be winners.
[As is the case in every trade agreement anywhere, just don't believe Trump when he says all Americans win from this deal.]
President Donald Trump announces a revamped
North American free-trade deal in the Rose
Garden of the White House in Washington,
D.C. (AP Photo/Pablo Martinez Monsivais)
The new deal, on the whole, is not any better than the old deal, but it’s surely better than the uncertainty created by renegotiating NAFTA and the chaotic atmosphere created by Trump during the negotiations.
Judging by the performance of the stock markets in both the U.S. .. https://money.cnn.com/2018/10/01/investing/stock-market-today-usmca-ge-tesla-dow/index.html .. and Canada since the deal was announced .. https://www.cbc.ca/news/business/markets-usmca-1.4845414 , Canadians are less convinced than Americans about the net benefits. The TSX rose by a modest 31 points while the Dow Jones climbed 193 points. The Canadian dollar strengthened, but that’s a mixed blessing.
If there’s any lesson to be learned after months of tense negotiations, it’s this: Canada should never again allow itself to be overly dependent upon one trading partner. Canada must diversify its products and services that liberate Canadians from the stranglehold of geography.
https://theconversation.com/the-winners-and-losers-in-the-new-nafta-104215
"Trump’s NAFTA Strategy: Bluff, Rebrand, Declare Victory"
October 2, 2018 8.51am AEST
IMAGE - Prime Minister Justin Trudeau and Minister of Foreign Affairs Chrystia Freeland arrive
to hold a news conference on the United States Mexico Canada Agreement (USMCA) in
Ottawa on Oct. 1, 2018. THE CANADIAN PRESS/Sean Kilpatrick
Author Atif Kubursi
Professor Emeritus of Economics, McMaster University
NAFTA is out but the United States-Mexico-Canada-Agreement (USMCA) is in .. https://www.cbc.ca/news/politics/usmca-nafta-trade-deal-1.4845219 .
But how different is USMCA from NAFTA? Who loses and who wins?
Canadian negotiators and government officials are singing the praises of the new deal, still subject to approval by U.S. Congress. U.S. Trade Representative Robert Lighthizer and Foreign Affairs Minister Chrystia Freeland said the agreement “will result in freer markets, fairer trade and robust economic growth in our region .. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/september/joint-statement-united-states .”
They added: “It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home.”
In this January 2018 photo, Foreign Affairs Minister Chrystia Freeland, centre, talks with United States
Trade Representative Robert Lighthizer, right, and Mexico’s Secretary of Economy Ildefonso Guajardo
Villarreal during NAFTA renegotiations. (Graham Hughes/The Canadian Press)
It’s understandable that the chief negotiators would try to sell the deal as a win-win-win agreement, but, like any deal resulting from long and at times acrimonious negotiations, it’s not quite that simple.
Challenging trade practices
The most significant achievement by Canadian negotiators is their success in preserving Chapter 19 .. https://globalnews.ca/news/4422423/nafta-chapter-19-explainer/ .. from the original NAFTA. These provisions allow Canada, Mexico and the United States to challenge one another’s anti-dumping and countervailing duties in front of a panel of representatives from each country.
This is generally a much easier, less costly and more predictable process than trying to challenge a trade practice in a U.S. court. Canada has successfully used Chapter 19 to challenge the United States on its softwood lumber restrictions .. https://www.theglobeandmail.com/report-on-business/canada-calls-for-stop-to-us-softwood-lumber-duties/article37516085/ .
[Insert: The truth behind Trump’s “trade war” with Canada
"For Americans, Trump’s tariffs on imports could be costly"
Trump didn't start the fight over Canadian softwood lumber
[...]
“It never ends; it’s like Groundhog Day,” says Ben Cashore, director of the Program on Forest Policy and Governance at Yale University. Cashore had been researching this dispute for years, he says, until he realized that it would go on forever. “I thought there had to be a better use of my time.”
p-The big difference this time around is the politicization of the spat. Presidents and Cabinet members don’t normally publicize their response to such a mundane trade dispute.
p-But Trump’s campaign was defined by blaming free trade for American job losses and economic woes, so his administration’s decision to publicize the move is a political calculation: It makes his team appear to crack down on trade abuses, even though it’s just more of the same.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=130839346 ]
Auto sector
Canada has also staved off the tariffs Trump threatened to impose on autos and auto parts .. http://news.morningstar.com/all/canada-news-wire/20181001C6515/usmca-framework-achieves-auto-gains-unifor.aspx .. that could have devastated the Canadian auto industry, which contributes over $50 billion in income and sustains more than 500,000 direct and indirect well-paying jobs in Canada.
The agreement would shield the first 2.6 million Canadian car exports to the U.S. from any tariffs. This is significantly higher than the current 1.8 million cars that Canada on average exports to the U.S. annually.
Under the terms of the agreement starting in 2020, a car will qualify for tariff-free treatment only if 75 per cent of its contents are made in North America, up from 62.5 per cent in the current NAFTA.
In addition, at least initially, 30 per cent of the content must be produced by workers earning at least US$16 an hour. This will ramp up to 40 per cent in 2023. The wage is more than three times what the average Mexican autoworker earns now.
A worker on the production line at Chrysler’s assembly plant in Windsor, Ont., works on a minivan in
January 2011. THE CANADIAN PRESS/Geoff Robins
Despite these successes, there are a few negatives to contend with that would affect this key industry. The wage hikes required in Mexico will undoubtedly raise the cost of production of North American cars and render a good part of them non-competitive on world markets, particularly in Asia.
While higher Mexican wages may discourage auto makers in Canada and the U.S. to relocate to Mexico, the new rules could create strong incentives for American and Canadian auto makers to move to Asia.
The dairy industry
The U.S. has repeatedly complained about the unfairness of Canada’s protection of its dairy industry as if the Americans don’t protect their own farmers. The Canadian supply management system is a far more efficient way to protect farmers’ incomes than the farm price support system in place in the United States.
Nonetheless, the U.S. got its way, forcing Canada to yield a larger market share for American dairy farmers. While Canada, under the new terms of the Trans-Pacific Trade Agreement, was willing to grant a 3.2 per cent market share to trade partners, under the USMCA, it yields 3.6 per cent.
[Why Canadian milk infuriates Donald Trump
[...]
Would controlled milk production work in the U.S.?
[...]
Exports
A concern expressed by representatives of the Dairy Business Association was whether the Canadian system would limit the ability to export milk to other countries.
p-Sherk said Canadian farmers are not interested in the export market but rather are working to increase milk and dairy sales within their own country.
p-“Exports provide the lowest return so we’re not interested in that,” he said. “Yes, demand will grow as the world population grows but it will be in places like Africa and Asia and what will they be able to afford to pay?”
p-Deitrich adds, “If we are going to be a wildly exporting country we would be shooting ourselves in the foot. We believe it is better to develop more dairy products and create more markets for our milk.”
Financing
The two Canadian speakers also advised, “Whatever route you take be sure you get the bankers involved. In Canada, bankers are more willing to loan money for modernization because of the stable prices.”
p-Don Hamm, president of the Wisconsin National Farmers Organization, points out that some of the problems with over-production in this country have been the result of the guaranteed loan programs. He notes that while the programs were intended to help farmers get affordable loans, all they have done is encourage bankers to loan more money for dairy expansions.
p-Both the NFO and Farmers Union have been concerned over expanded production that results in the inability of farmers to negotiate a fair price for their milk.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=141429839]
Perhaps more significant is Canada’s willingness to eliminate the pricing scheme for what is known as Class 7 dairy products allowing U.S. producers to out-compete Canadian farmers.
-
Read more: How the dairy lobby's cash grab put Canada in Trump’s crosshairs
http://theconversation.com/how-the-dairy-lobbys-cash-grab-put-canada-in-trumps-crosshairs-102974
-
The government has already suggested .. https://ipolitics.ca/2018/10/01/supply-management-saved-say-trudeau-and-freeland/ .. it will introduce subsidies and farm income protection schemes that Canadian taxpayers will have to pay for.
Drug patents
A serious change is Canada’s acceptance of lengthening the patents of pharmaceutical companies to 10 years. This pretty much means that U.S. drug companies will now be able to sell pharmaceuticals in Canada for 10 years before facing generic competition. That’s up from the eight years of “market protection” that’s currently in place.
-
Read more: NAFTA negotiations may threaten pharmacare
http://theconversation.com/nafta-negotiations-may-threaten-pharmacare-102851
-
This means individuals, insurance companies and governments will pay more for pharmaceuticals.
Intellectual property rights
New and more stringent intellectual property rights rules and time limitations for the protection of patents and trademarks, including those for biotech, financial services and even domain names, are included in USMCA.
While many believed that these updates were necessary given that the original agreement was negotiated 25 years ago, Canada will benefit less from these protections than the U.S. given the differences in size of these sectors in both countries.
Labour, environment
The USMCA makes a number of significant upgrades to environmental and labour regulations, especially those in force in Mexico. The agreement stipulates that Mexican trucks that cross the border into the United States must meet higher safety regulations, and that Mexican workers must have more ability to organize and form unions.
[That in itself is good news, but...]
The real issue with these provisions, now as before, is this: Will these new standards be implemented in Mexico? U.S. negotiators tried hard to introduce an automatic sunset clause on the deal but
failed to get their way .. https://www.theguardian.com/us-news/2018/aug/25/nafta-trump-drops-sunset-clause-demand-mexico .
As things stand now, the USMCA stipulates that the three nations will automatically review the agreement after six years. If all parties agree it’s still working, then the deal will continue for the full 16-year period, with the ability to renew after that for another 16 years.
Trump did not get his wish for the sunset clause, but there will be an automatic review, although it won’t happen until long after Trump has vacated the Oval Office.
Better than chaos
So it’s incorrect to claim that all North Americans will be better off under the new deal. There will be losers, and there will be winners.
[As is the case in every trade agreement anywhere, just don't believe Trump when he says all Americans win from this deal.]
President Donald Trump announces a revamped
North American free-trade deal in the Rose
Garden of the White House in Washington,
D.C. (AP Photo/Pablo Martinez Monsivais)
The new deal, on the whole, is not any better than the old deal, but it’s surely better than the uncertainty created by renegotiating NAFTA and the chaotic atmosphere created by Trump during the negotiations.
Judging by the performance of the stock markets in both the U.S. .. https://money.cnn.com/2018/10/01/investing/stock-market-today-usmca-ge-tesla-dow/index.html .. and Canada since the deal was announced .. https://www.cbc.ca/news/business/markets-usmca-1.4845414 , Canadians are less convinced than Americans about the net benefits. The TSX rose by a modest 31 points while the Dow Jones climbed 193 points. The Canadian dollar strengthened, but that’s a mixed blessing.
If there’s any lesson to be learned after months of tense negotiations, it’s this: Canada should never again allow itself to be overly dependent upon one trading partner. Canada must diversify its products and services that liberate Canadians from the stranglehold of geography.
https://theconversation.com/the-winners-and-losers-in-the-new-nafta-104215
It was Plato who said, “He, O men, is the wisest, who like Socrates, knows that his wisdom is in truth worth nothing”
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